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Securitized Trust Did Not Meet Florida UCC Requirements for Enforcement of Lost Mortgage Note
| March 7, 2010


Article Below Originally Posted By Mario Kenny
“Editors Note: The unspoken word in this posting is DISCOVERY! It is without question that any argumentto combat the re-establishment of a lost note or to simply combat the allegation of right to enforce a missing promissory note or to foreclose on the related mortgage requires a proof that can only be found through discovery! In addition, consider the MERSassignment theory then apply these same argumentsto whoever MERSassigned the mortgage to (since they never have heldeither the note and/or mortgageto begin with).Check the Discovery Tactics Tab for new strategies and tactics.

March 7, 2010

The Florida Fourth District Court of Appeals decided an issue quite pertinent to today’s foreclosure environment in the case of StateStreetBank and Trust Co., Trustee for Holders of Bear Stearns Mortgage Securities, Inc. Mortgage Pass-Through Certificates, Series 1993-12 v. Harley Lord, et al., 851 So.2d 790 (Fla. 4th DCA 2003). The Court held that StateStreetcould not maintain a cause of action to enforce a missing promissory note or to foreclose on the related mortgage in the absence of proof that it or its assignor ever held possession of the promissory note. Section 673.3091, Florida Statutes (2002).

StateStreet filed an action in the Circuit Court under section 71.011, Florida Statutes to reestablish the lost promissory note. The Court of Appeals upheld the lower court’s decision and held that the right to enforce the lost instrument was not properly assigned to StateStreetwhere it was found that neither StateStreetnor its predecessor in interest possessed the note and StateStreetdid not otherwise satisfy the requirements of section 673.3091, Florida Statutes (2002) which is Florida’s version of the UCC’s article on negotiable instruments. The court noted that it was undisputed that the note was lost before the assignment to StateStreet was made.

In footnote one, the Court noted that the enforcement of lost promissory notes, which are negotiable instruments, is actually governed by section 673.3091, Florida Statutes and not section 71.011 which governs enforcement of lost papers. It should be noted that the case of Mason v. Rubin, 727 So.2d 2883 (Fla. 4th DCA 1999) previously held that the reestablishment of a lost promissory note which is a negotiable instrument is controlled by section 673.3091, Florida Statutes (1993) and not section 71.011, Florida Statutes (1995). The court explained that section 71.011, Florida Statutes (1995) provides for establishing lost documents “except when otherwise provided” – the implication being that section 673.3091, Florida Statutes (1993) otherwise provides. The court also characterized the provisions of section 673.3091, Florida Statutes (1993) as “more stringent requirements” than section 71.011, Florida Statutes (1995).

The Court explained that pursuant to section 90.953, Florida Statutes, (2002), Florida’s code of evidence, the plaintiff in a mortgage foreclosure must present the original promissory note as a duplicate of a note is not admissible. Otherwise, the plaintiff must meet the requirements of section 673.3091, Florida Statutes to pursue enforcement. W.H. Dwoningv. First Na’tl Bank of Lake City, 81 So.2d 486 (Fla.1955), Nat’l Loan Investors, L.P. v. JoymarAssocs., 767 So.2d 549, 551 (Fla. 3d DCA 2000).

The Court further explained that although it and the Third District Court of Appeals have held that the right or enforcement of a lost note can be assigned, here there was no evidence as to who possessed the note when it was lost. See Slizykv. Smilack, 825 So.2d 428, 430 (Fla. 4th DCA 2002), Deakterv. Menendez, 830 So.2d 124 (Fla. 3d DCA 2002). In Slizyk, the Court allowed the assignee of the note and mortgage to foreclose as the assignorof the note was in possession of the note at the time of the assignment and therefore the right to enforce the instruments was assigned to the assignee as well. In contrast, here the undisputed evidence was that the assignornever held possession of the note and therefore could not enforce the note under section 673.3091, Florida Statutes (2002). As the assignor could not enforce the lost note under section 673.3091, it had no power of enforcement which it could assign to StateStreet.

The court noted that it did not reach the question of whether Slizykand National Loan could be applied to allow enforcement of a note if there was proof of possession by an assignorearlier than the most immediate assignor.

It should be noted that in 2004, section 673.3091(1)(a), Florida Statutes was amended to allow enforcement of an instrument if the “person seeking to enforce the instrument was entitled to enforce the instrument when loss of possession occurred, or has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred.” It is not clear that this amendment would have changed the court’s decision in StateStreet.

StateStreet was later citedwith approval by DasmaInvestments, LLC v. Realty Associates Fund III, L.P., 459 F.Supp.2d 1294(S.D.Fla.2006) where the court held that if a party is not in possession of the original note and cannot reestablish it, the party cannot prevail in an action on the note. In Dasma, the court explained that in Florida a promissory note is a negotiable instrument and that a party suing on a promissory note, whether just on the note itself or together with a foreclose on a mortgage securing the note, must be in possession of the original of the note or reestablish the note pursuant to Fla. Stat. 673.3091. See, Shelter Dev. Group, Inc. v. Mma of Georgia, Inc., 50 B.R. 588, 590 (Bkrtcy.S.D.Fla.1985).

StateStreet was also cited with approval in the case of In re American Equity Corporation of Pinellas, 332 B.R. 645 (M.D.Fla.2005)(Paskay, J.) where the court held that a party must comply with section 673.3091, Florida Statues in order to enforce a lost, destroyed or stolen negotiable instrument. It is noteworthy that the court found that the creditors’ affidavits merely stated that the creditors had searched for the original promissory notes but were unable to find them and failed to state that the creditors ever received possession of the original promissory note.

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  1. Great analysis of State Street v. Lord. However, this case is no longer applicable as 673.3091, Florida Statutes was amended in 2004.

    • Correct 673.3091, FLorida Statute was amended in 2004 as stated in the 3rd to last paragraph down of the posting. As noted however, multiple cases after the amendment cited State Street with approval. It is unclear if the 2004 amendment would have changed the courts decision in State Street.


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